It has been obvious for some time that the business rates system is open to abuse. But the abuse is not typically inflicted by occupiers seeking to unfairly avoid the property tax.
Rather it is perpetrated by less-than-honest advisers that promise businesses the earth, fail to deliver on their promises and manage to gain healthy fees for themselves into the bargain.
As a result, the RICS has received a high number of complaints from small businesses in particular, which feel they have been duped into signing contracts that are less than transparent.
In response, the industry body has drawn up a new code of practice for rating agents that sets out what is and is not acceptable - and gives the RICS more power to intervene when it is concerned about sharp practices.
The document, which came into force at the start of the month, has been endorsed by the Federation of Small Businesses (FSB), which worked closely with the RICS in drawing up the new code and described it as the most rigorous created to date.
“At its core is a declaration to be signed by both client and consultant before a contract is agreed,” says FSB national chairman Mike Cherry. “This will equip small firms with the awareness they need before signing on the dotted line. That includes the understanding that an appeal can send business rates up as well as down and recognition of the fees that apply during the appeals process.”
Property Week caught up with Mark Higgin, head of rating at Montagu Evans and one of the code’s authors, to find out more.
The reason for doing it was that there was substantial interest among certain groups within the economy, particularly small businesses, which led to the RICS receiving not a deluge, but a significant amount of correspondence around rating advice. It was felt that the code, which dated back around 10 years or more, was due for a bit of a dust-off and an update to give the RICS more teeth to deal with miscreants that were bringing the system into disrepute, not to put a finer point on it.
The issues that really concerned them were very aggressive marketing, misrepresentation of obtaining reductions in assessment, onerous terms extending over more than one revaluation, onerous terms for cancellation of contracts and a lack of due diligence in initial advice - appeals being lodged without proper reconnaissance and thorough investigation to see if there was a proper case to be presented. It was a list of things really.
It’s more towards the latter end. The firms that are the real bottom feeders and are operating at the very edges of legality - that are not really legit organisations - aren’t generally members of the RICS anyway. They are set up by unscrupulous individuals to pay upfront fees and then disappear.
However, there are some entities that appear to have genuine intentions and are sold as being professional and legitimate and all the things you would expect in a decent firm of surveyors, but some of their activities needed to be looked at in a bit more detail. It was certainly felt among the three of us that authored the code that those issues needed to be addressed and the code in its current format needed to be addressed.
The code didn’t really address aggressive marketing or issues around the misrepresentation of potential reductions or punitive fees for the cancellation of contracts. Those were the issues we very much wanted to address.
We wanted to make sure that people knew what they were signing up for at the beginning of a contract. Obviously we cannot stop people signing up for more than one revaluation period if they are asked to do so; that is a commercial decision, but it is often hidden in small print.
Clients that had signed up with some outfits had suddenly found that things were not going the way they wanted them to.
Maybe they found the assessment had gone up or they weren’t happy with the way in which a case had been handled and then they found they were tied in and if they wanted out they found they were liable for a fee that would exceed the refund they were expecting.
What we were trying to do with the document, in particular with the declaration, was to raise awareness and help people who are signing up for contracts to fully understand the possibilities that might lie ahead further down the road, particularly if they want to back out and appoint someone else. Those were the drivers really. There wasn’t anything in the previous code that addressed those issues.
If they’re in direct contravention of any of the guidance in the code then obviously it gives the RICS the ability to bring them to book.
It was deliberate. It was important because at every revaluation people are being signed up for a new five-year period and most clients only sign for five years. It was felt that if there was a lot of activity around the new list then it should conform to best practice. So we wanted to get it out at the same time. It just seemed like an opportune time when there was a lot of publicity around the rating system as well to get the maximum exposure for the new code.
Yes, but not just small companies. It is about big businesses as well, actually. It’s not just the small companies that have been caught out. The idea was that we would get it out there in the public eye and show that the RICS was fulfilling its public service mandate that it always prides itself on. That’s the reason for its charter - the public service of its operations. That drove us to a 1 April deadline. Ideally, we would have liked it out a bit earlier, but it has to go out for consultation and through the advisory board.
People might be interested, but the means by which they can access the system have changed radically. The problem for most people is that they’re going to find it very difficult to engage with the system. The Valuation Office said last week that they’re going to have to prove that they own the property. So for a company like Tesco, they’re going to have to upload 4,000 leases just to link themselves to a property before they can even start the process. The level of administration has just morphed into something that is out of control. It’s a bit of a disaster.
Making it more difficult could protect the individual ratepayer. The problem is that the system as it stands will hinder any company that has more than 10 properties because it is just a huge administration problem. They have to link themselves and their agent to the property and there is no facility to do that other than individual record by individual record.
13 April 2017
13 April 2017
14 March 2017
7 December 2016